Accredited Investor defined: An accredited investor is an investor who is financially sophisticated and has a reduced need for the protection provided by certain government filings. Most startups or private companies prefer to raise money or from accredited investors because of the vastly reduced paperwork required to be filed with the SEC, and the far fewer disclosures required to be made in writing to the Investor. Accredited investors include: 1. a bank, insurance company, registered investment company, business development company, or small business investment company; 2. an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million; 3. a charitable organization, corporation, or partnership with assets exceeding $5 million; 4. a director, executive officer, or general partner of the company selling the securities; 5. a business in which all the equity owners are accredited investors; 6. a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase; 7. a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or 8. a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.
Above is a definition for “Accredited Investor” from PrivCo’s Private Company Knowledge Bank, the definitive online and e-book guide to private companies and private company deals.
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